In the challenging and often unpredictable world of emerging markets, achieving optimal trade execution has become an essential component of meeting fund objectives. Electronic trading is increasingly taking center stage, enabling both buy-side and sell-side participants to access deep liquidity and market data effortlessly, even for larger trades. A recent client panel hosted by MarketAxess brought together industry leaders from RBC BlueBay Asset Management, Aberdeen, and Morgan Stanley to explore key trends reshaping the EM Hard Currency landscape. Discussions centered on the growing importance of technology infrastructure, new execution solutions, and the expanding role of trade and performance data.
Enhancing Execution with Advanced Tools
The evolving nature of EM Hard Currency trading demands a more sophisticated and technology-driven approach. Traders are adopting digitalized methods tailored to their specific needs, selecting the most suitable products to execute trades effectively. From Open Trading platforms to Targeted Request-for-Quote (TRFQ), traders are diversifying their strategies to ensure dealers understand their requirements for execution efficiency and data management. As trade volumes increase, there is a pressing need for a more precise and targeted execution environment.
On the buy side, traders recognize protocol selection as a critical skill. They aim to balance obtaining extensive data with the ability to process it efficiently. For instance, dealers may provide quoted prices, but if these do not hold at the time of trade, they lose value. Consequently, dealers who consistently meet buy-side expectations secure more frequent and larger transactions. Automation plays a pivotal role in promoting scalability and efficiency throughout the trading process. It helps manage growing trade volumes while reducing headcounts, freeing up time for executing larger trades and researching appropriate solutions.
Introducing TRFQ: A Game-Changer in EM Trading
Launched recently, TRFQ has emerged as a valuable addition to the EM Hard Currency toolkit. This solution caters specifically to larger trade sizes, enhancing pricing for significant transactions and facilitating matches with the best available counterparties. Designed for trades exceeding $3 million, TRFQ simplifies dealer selection by suggesting up to eight sell-side players active in relevant bonds. By combining the advantages of voice trading with the efficiency of electronic systems, TRFQ offers a swift path to optimal execution outcomes.
Data-driven workflows are a standout feature of TRFQ, allowing traders to make informed decisions based on multiple factors such as live axes and market depth. Participants highlighted the benefits of leveraging data for accurate mid-prices and understanding bond volumes. From the dealer's perspective, TRFQ provides monthly statistics and the chance to join select fields once chosen for any ticket. Open Trading continues to play a crucial role alongside TRFQ, offering unparalleled liquidity through over 2,000 global institutions. It enables anonymous counterparties and enhances execution options, particularly for smaller trades under $2 million. With average daily volumes reaching approximately $4 billion, buy-side participants appreciate the ability to connect with accounts without established relationships, opening doors to new insights and opportunities.